Analogic: Screening Even The Checked Luggage

After A Steeo Tumble
Analogic (ALOG ), which makes explosives detectors, got battered when Dalton Chandler at Needham downgraded the stock in mid-October -- from a strong buy to a buy. Shares fell from 51 to 40 by mid-November, where it is now trading. Analogic sells airport scanners for checked bags to L-3 Communications (LLL ), which integrates them into devices it sells to the government. Prompting the downgrade was a delay in Analogic's shipments to L-3: U.S. airports were behind schedule in building structures to house them. But some big investors haven't cooled off. Eric Miller of Heartland Advisors, which owns 3%, says shipments will go through in due time.

The Transportation Security Administration's goal was to buy a total of 2,000 scanners at $1 million apiece. Last year, the TSA bought 1,000 units. This year, the government has budgeted $150 million for airport scanners. It only bought 100 in 2003. Chandler expects part of the remainder by April, 2004. Miller sees the stock taking off before then. Despite the downgrade, Chandler has a price target of 60. He expects Analogic to earn $1.48 a share on sales of $132 million in fiscal 2004 ending July 31. Last year, it made $3.70 on $471 million in sales.

Note: Unless otherwise noted, neither the sources cited in Inside Wall Street nor their firms hold positions in the stocks under discussion. Similarly, they have no investment banking or other financial relationships with them.

By Gene G. Marcial

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